China Resources Micro released the 2023 annual report and the report for the first quarter of 2024: in 2023, the company achieved operating income of 99.01 billion yuan, a year-on-year decrease of 1.59%, and realized net profit of 1,479 billion yuan, a year-on-year decrease of 43.48%; in the first quarter of 2024, the company achieved operating income of 2.116 billion yuan, a year-on-year decrease of 9.82%, and achieved net profit of 0.3 million yuan, a year-on-year decrease of 91.27%.
Key points of investment
Major projects are arranged countercyclically, and performance is under pressure in the short term
In 2023, the domestic semiconductor market was affected cyclically, and the industry was in a phase of downward adjustment. The company's operating profit, total profit, net profit attributable to the owner of the parent company, net profit attributable to the owner of the parent company after deducting non-recurring profit and loss, and basic earnings per share declined year-on-year, mainly due to low market sentiment, and the company actively laid out major projects countercyclically to increase R&D investment. In 2023, R&D investment was 1,154 billion yuan, up 25.30% year on year, accounting for 11.66% of revenue. At the same time, new businesses such as two 12-inch lines and a sealed testing base were gradually developed, and the overall cost increased during the period. The company's Q1 performance in 2024 was still affected by sluggish terminal boom, and product prices were under pressure, causing gross margin to decline; at the same time, capacity utilization declined due to power maintenance and the Spring Festival; the company's high R&D investment continued to Q1, up 7.11% year on year, and projects such as the sealing base and two 12-inch lines were in the early stages of high investment; in addition, the stock prices of the two companies involved in strategic placement fell, and changes in their fair value affected Q1 performance.
The product structure has been transformed and upgraded, and the proportion of high-end application areas has steadily increased, and downstream terminal applications in the company's product and solution sector mainly focus on four major fields. Among them, the pan-new energy sector (vehicles and new energy) accounts for 39%, the consumer electronics sector accounts for 34%, industrial equipment accounts for 16%, and communication equipment accounts for 11%. The company continuously adjusts the product structure, customer structure and terminal application structure, and focuses on automotive electronics, new energy, industrial control and other fields. The company has comprehensively expanded the automotive electronics market, entering key car companies such as BYD, Geely, FAW, Changan, and Wuling, promoting the localization of automotive chips through multiple channels, making steady progress in automotive-grade product reserves, and third-generation semiconductor SiC products have won top marks from well-known car companies. Companies in the field of new energy sources such as photovoltaic inverters and inverters have also increased their customer development efforts and increased their market share. The share of revenue in the new energy sector in the product and solution sector increased from 16% in 2022 to 20% in 2023, and the products entered key customers such as Sunshine Power, Deye Co., Ltd., and Huichuan. The pan-renewable energy sector is expected to continue growing in 2024. In 2024, the high-end application field of MOSFET products, the company's key products will be further enhanced, and it will continue to maintain its leading domestic market share; IGBTs, third-generation semiconductors, smart sensors, module products, etc. will further expand emerging applications and will become performance growth points in 2024.
Production capacity such as 12-inch cable and sealing and testing bases was gradually released, driving performance restoration and growth
The company is deeply involved in the national strategic layout of the Liangjiang River and the three regions, and the production capacity of 6-inch and 8-inch wafers maintains a high level of the industry; the 12-inch production line in Chongqing focuses on power devices, mainly MOSFETs and IGBTs, etc., which are currently in the production capacity climbing and customer verification stage, and the increase will have a positive impact on revenue; the 12-inch production line in Shenzhen focuses on 40-90nm characteristic analog power integrated circuit products and MCU products. The main plant has been built in 2023 and has gradually entered the installation stage. It is expected that the equipment will be put into operation by the end of 2024 After full production, it will form a production capacity with an annual output of 480,000 12-inch power IC chips; the mass production scale of advanced power sealing and testing bases will increase rapidly, and the overall revenue of the packaging sector is expected to increase significantly in 2024; high-end masks will be mass-produced in the second quarter. The first phase of the project will break through 40nm technology nodes and plan a production capacity of 1000 pieces/month. The second half of the year will focus on 90nm advanced process research and development, achieve mass production and shipment as soon as possible, and further expand high-end mask projects 40nm production capacity. At the same time, the company will take full advantage of its huge silicon-based 6-inch production capacity, plan and launch production capacity expansion for third-generation wide bandgap semiconductors to prepare for subsequent market demand.
Profit forecasting
It is predicted that the company's revenue for 2024-2026 will be 109.30, 121.69 billion yuan, and 13.667 billion yuan respectively, and EPS will be 1.13, 1.30, and 1.44 yuan, respectively. The current stock price is 33.8, 29.4, and 26.6 times PE, respectively. As a power semiconductor IDM leader, the company is under pressure in the short term. With the transformation and upgrading of the company's product structure and the gradual release of production capacity such as 12-inch cable and testing bases, it is expected that the performance will usher in repair and growth, covering for the first time, giving an “increase in holdings” investment evaluation grade.
Risk warning
Macroeconomic risks, risk of product development falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations.